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Thursday, January 31, 2013

Croatia Cut to Junk by Moody’s on Fiscal Weakness, External Risk. Croatia’s
credit rating was cut to junk by Moody’s Investors Service, which cited
a stalled recovery, lack of budget discipline and the nation’s
vulnerability to external shocks. The Balkan country’s government
bond rating was lowered to Ba1 from Baa3, joining Hungary and Ireland at
that level, Moody’s said in a statement released in London today.
Standard & Poor’scut Croatia to junk in December. Moody’s also
changed the
nation’s outlook to stable from negative, saying the risk the
government’s fiscal position and debt will “materially
deteriorate any further” is limited.

Australia Manufacturing Gauge Fell to 3 1/2-Year Low in January. A
gauge of Australian manufacturing fell to a 3 1/2-year low in January
as the sustained strength of the currency outweighed the central bank’s
reduction in interest rates to a half-century low. The manufacturing
index dropped 4.1 points to 40.2 last month, the lowest level since June
2009, the Australian Industry Group said in a survey released today.
The last reading above 50, the divide between expansion and contraction,
was in
February 2012.

Egypt Opposition Gears Up for Protest After Pledge to End Unrest. Egypt’s secular opposition pushed
ahead with plans for protests today against President Mohamed Mursi, hours after joining forces with their Islamist rivals in
pledging to work to stabilize a nation mired in violence. Exactly a
week earlier, demonstrations marking the second
anniversary of the Jan. 25 uprising that ousted Hosni Mubarak unleashed a
wave of street battles that left over 50 dead. The rallies today may
risk more of the kind of conflict that
prompted Mursi’s secular and youth activist critics to band with
the Islamists in backing an initiative they hoped would lay the
foundation for a “serious dialogue.”

Militants in Northern Africa Said to Pose Growing Threat. Islamist groups in northern Africa
are trading personnel, equipment and expertise and pose a
growing threat to potential targets there, including Western
businesses and diplomats, according to U.S. officials. Three intelligence officials said that what they called
cross-pollination among groups such as al-Qaeda in the Islamic
Maghreb, Ansar al-Dine and al Mulathameen have prompted U.S.
agencies to focus more closely on the desert lands from
Mauritania to Niger, especially in light of recent terrorist
attacks in Libya, Algeria and Mali.

Chinese Hackers Target U.S. Media. Chinese
hackers have been conducting wide-ranging electronic
surveillance of media companies including The Wall Street Journal in an
apparent effort to spy on reporters covering China and other issues,
people familiar with incidents said. Journal publisher Dow Jones &
Co. said Thursday that the paper's computer systems had been infiltrated
by Chinese hackers for the apparent purpose of monitoring its China
coverage. New York Times Co. disclosed Wednesday night that its
flagship newspaper also had been the victim of cyberspying. Chinese
hackers for years have targeted major U.S. media companies with hacking
that has penetrated deep inside some newsgathering systems, several
people familiar with the response to the cyberattacks said.

Lingering Bad Debts Stifle Europe Recovery. Many Europeans are on the hook for unpaid mortgage balances even
after losing their homes. And millions struggle to pay for apartments
and houses that are worth far less than they paid. Data released by Eurostat on Thursday
showed average euro-zone house prices declined further in the third
quarter, dropping 0.7% from the previous quarter. Prices in the
Netherlands fell 3.9%, the biggest drop in the euro zone, and prices
fell 3.7% in Spain.

ObamaCare's Broken Promises. Every one of the main claims made for the law is turning out to be false. As the federal government moves forward to implement President Obama's
Affordable Care Act, the Department of Health and Human Services is
slated to spend millions of dollars promoting the unpopular legislation.
In the face of this publicity blitz, it is worth remembering that the
law was originally sold largely on four grounds—all of which have become
increasingly implausible.

Senate ethics panel reviews gift accusations against Menendez.
The Senate Ethics Committee is reviewing allegations that Sen. Robert
Menendez accepted inappropriate gifts from a Florida doctor who has
flown the New Jersey Democrat to his estate in the Dominican Republic, a
senior member of the panel confirmed Thursday. Sen.
Johnny Isakson (Ga.), the ranking Republican on the committee, said the
panel saw reports of the Tuesday FBI raid on the West Palm Beach
offices of Salomon Melgen, a Menendez friend and political supporter who
is also in an $11 million tax dispute with the Internal Revenue
Service. That was followed by Menendez’s confirmation Wednesday night
that he wrote a personal check of more than $58,000 to pay for flights
on Melgen’s private jet to his Dominican estate — for a pair of trips
there more than two years ago.

NY Times:

Doubt Is Cast on Firms Hired to Help Banks. Federal authorities are scrutinizing the private consultants hired by
banks to clean up financial misdeeds like money laundering and
foreclosure abuses, taking aim at a conflict-riddled, billion-dollar
industry.

AP:

US looking at action against China cyberattacks. The Obama
administration is considering more assertive action against Beijing to
combat a persistent cyber-espionage campaign it believes Chinese hackers
are waging against U.S. companies and government agencies. As The New York Times and Wall Street Journal reported Thursday that their computer systems had been infiltrated by China-based hackers, cybersecurity experts said the U.S. government is eyeing more pointed diplomatic and trade measures.

Korea becomes the red flag for Asia's currency war. South Korea's threat to impose
a broad tax on financial transactions is the first sign of
deepening concern in Asia that speculation of competitive
currency devaluations is prompting investors to head for the
exit.

US seeks greater ethanol use despite efforts to cut it. Corn
ethanol would get a
larger share of the U.S. gasoline market under a government proposal on
Thursday while ranchers, environmentalists and the oil industry aim to
kill the renewable fuels mandate altogether. The Obama
administration proposed a 9 percent increase in the so-called renewable
fuels standard from 2012, in line with a 2007 law. Half of the 1.35
billion-gallon increase would go to corn ethanol and half to "advanced"
biofuels that produce half the greenhouse gases of first-generation
ethanol. Overall, biofuels would be allotted 16.5 billion gallons of
the fuel market for cars and light trucks. The mandate reaches
36 billion gallons in 2022, with half of the mandate going to
new-generation biofuels.

Canadians' possible role in Algeria attack of great concern to US. Signs that Canadian citizens
were involved in the attack by hostage-taking Islamist militants
on a remote gas plant in Algeria are of great concern to
American authorities, U.S. intelligence officials said on
Thursday. While Algerian authorities apparently have not yet provided
Western governments with cast-iron proof, a senior U.S.
intelligence official said, "We're taking very seriously the
reports of the two Canadians' involvement."

Financial Times:

US banks squeezed as mortgage profits hit. US
banks are suffering a squeeze on mortgage profits after a bumper two
years, adding to pressure on the earnings of Wells Fargo, Bank of
America and the other large lenders.

China News Service:

Wenzhou Pressures Banks to Not Call in Loans. The eastern Chinese
city of Wenzhou may withdraw deposits from banks that call loans from
companies.

BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Monte Paschi Rating Cut by S&P on Concern Losses May Increase. Banca Monte dei Paschi di Siena SpA (BMPS), the Italian lender facing a government investigation stemming from money-losing structured deals, had its credit rating cut by Standard & Poor’s. Losses on the transactions “may be higher than initially
anticipated” and demonstrate “a risk of management
weaknesses,” S&P said today in a statement. The Siena-based
lender had its long-term grade cut to BB from BB+ and remains on
watch negative, which means it may be downgraded again.

Spain Lifts Short-Selling Ban on Stocks After IBEX 35 Rallies. Spain lifted a ban on short-selling
stocks as the benchmark IBEX 35 Index (IBEX) rallied and the country’s banks took steps to repair their balance sheets. Authorities won’t extend restrictions that expired today,
the stock market regulator, known as CNMV, said in an e-mailed
statement today. Short-sellers sell borrowed shares with plans
to buy them back later at a lower price, a practice some
politicians and investors blame for roiling markets.

European Stocks Trim Month Gain. European
stocks fell for a second day, paring their biggest monthly advance
since July, as companies from AstraZeneca Plc to Banco Santander SA
(SAN) slid after reporting earnings. AstraZeneca lost 3.2 percent after the drugmaker forecast
that profit and sales will slide this year. Santander and Royal
Dutch Shell Group Plc both declined more than 2.5 percent as
fourth-quarter earnings missed analysts’ estimates. The Stoxx Europe 600 Index (SXXP) retreated 0.5 percent to 287.22
at the close, as more than two stocks fell for every one that
rose.

OPEC January Crude Production Falls to 15-Month Low in Survey.
OPEC crude oil production declined to a 15-month low as Saudi Arabia
reduced output because of waning demand from consumers, a Bloomberg
survey showed. Output in the 12-member OPEC slipped 525,000 barrels, or
1.7%, to an average 30.479 million barrels a day this month from a
revised 31.004 million in December, the survey of oil companies,
producers and analysts showed. The December total was revised 430,000
barrels a day lower mostly because of the change to the Saudi number.
"OPEC members are cutting because of concern about demand and a surplus
in stockpiles and are responding to a lack of market interest," said
Sarah Emerson, managing director of Energy Security Analysis Inc. in
Wakefield, Massachusetts.

Consumer Comfort in U.S. Falls for Fourth Straight Week. Consumer
confidence fell again last week, raising the risk that the payroll tax
increase that kicked in at the start of the year will make it difficult
to sustain a pickup in spending. The Bloomberg Consumer Comfort Index
dropped to minus 37.5 in the period ended Jan. 27, the fourth
consecutive decrease and the lowest reading since October.

Business Activity in U.S. Grew More Than Forecast in January. Business activity in the U.S.
expanded more than forecast in January, a sign manufacturing picked up at the start of the year. The MNI Chicago Report’s business barometer rose to 55.6
this month, the highest since April, after 50 in December. The median forecast of 48 economists surveyed by
Bloomberg was 50.5.

Jobless Claims in U.S. Rose 38,000 Last Week to 368,000. Claims for U.S. unemployment benefits increased more than forecast
last week, nearly erasing a slide in the prior two weeks and reflecting
the difficulty of adjusting the figures for swings at the start of a
year. Initial jobless claims rose 38,000 in the week ended Jan. 26,
the most since Nov. 10, to 368,000, the Labor Department reported today
in Washington. Economists forecast 350,000 filings, according to the
Bloomberg survey median.

Troubled Companies Seen Winning Lifelines in ‘Fragile’ Market. While U.S. icons from Hostess Brands Inc. to Eastman Kodak Co. (EKDKQ) succumb to bankruptcy, credit
markets awash with cash are allowing many of the riskiest companies to
stay afloat, pushing off restructurings and raising the stakes
for investors pursuing higher returns. Junk-bond sales soared to a record last year and
speculative-grade borrowers raised the most in loans since the
2007 peak, while business bankruptcies fell 22.4 percent to
57,500 compared with 2011. Chapter 11 cases, where companies
reorganize or sell assets, dropped by 12.4 percent, according to
data compiled from court records by Epiq Systems Inc. At the
same time, storied U.S. brands struggling with legacy
liabilities and outdated products proved vulnerable.

Gross Says Credit-Based Markets Running Out of Energy. Bill Gross, manager of the world’s
biggest bond fund, said investors are increasingly at risk as
global financial markets run out of energy and time. “The countdown begins when investable assets pose too much
risk for too little return,” Gross wrote in his monthly
investment outlook posted on Newport Beach, California-based
Pacific Investment Management Co.’s website today. The record monetary stimulus of the Federal Reserve,
triggering near-zero interest rates, has crippled savers and
prior business models that were based on a positive real return,
he said. Real growth of the economy has suffered in the process
as net interest margins at banks fall, insurance companies
struggle to make returns and pension funds are increasingly
underfunded.

Biggest IPO Since Facebook(FB) Tests Pfizer’s(PFE) Pigs and Dogs Strategy.
Pfizer Inc. is taking its animal- health unit public in the biggest
U.S. initial offering since Facebook Inc., a bet that growing affluence
means more spending on caring for livestock and pets. Pfizer’s Zoetis
Inc. is seeking to sell 86.1 million shares today for $22 to $25
each, giving the unit a market value of about $11.8 billion at the
midpoint of the range, regulatory filings show.

InBev Sued by U.S. to Block $20 Billion Grupo Modelo Deal. The
U.S. sued to block Anheuser- Busch InBev NV (ABI)’s proposed $20.1
billion purchase of the half of Grupo Modelo SAB it doesn’t already own,
saying the deal would hurt competition and raise prices. Shares of
both companies plunged after the Justice Department filed a complaint
today in federal court in Washington, arguing the transaction violates
antitrust law
because it would eliminate the “substantial head-to-head
competition” that currently exists between AB InBev and Modelo.

Immelt-Led Advisory Council on Jobs Allowed by Obama to Expire. President
Barack Obama won’t renew the charter of an advisory council on jobs
that he formed two years ago with General Electric Co. (GE) Chief
Executive Officer Jeffrey Immelt as its chairman. The 27-member
President’s Council on Jobs and Competitiveness was part of the
administration’s business outreach at a time when the country was
dealing with the longest stretch of unemployment rates above 9 percent
since monthly
records began in 1948.

Hagel faces tough questioning from McCain, others during confirmation hearing. Chuck Hagel faced tough questioning from senators Thursday as he
tried to convince at least five Republicans to back his nomination for
Defense secretary -- but lawmakers, including fellow Vietnam War veteran
Sen. John McCain, dug in their heels during a tense confirmation
hearing. Another Republican lawmaker accused Hagel of "appeasing our
adversaries." But McCain's position on Hagel could be a significant
bellwether for his nomination. The two veterans once had a close
relationship during their years in the Senate, but politics and Hagel's
opposition to increased troop numbers in Iraq divided the two men. It
was the troop surge in Iraq that became a flashpoint between
McCain and Hagel during Thursday's hearing. McCain repeatedly tried to
get Hagel to answer whether he was "right or wrong" when he once called
the troop surge a "dangerous foreign policy blunder."

CNBC:

Main Street Remains Pessimistic, Sees Little 2013 Hiring: Survey.
While there's evidence suggesting the jobs market is slowly recovering, a
large chunk of small-business owners remain pessimistic and expect the
economy to remain stagnant or worsen in 2013, according to a new survey
of 600 small firms. Most respondents also said they plan to trim costs, and 87 percent said they did not plan to hire additional employees.

Short-Term Palliatives And The 5 Terrible Tendencies Of Government. The short-term palliatives we are currently pursuing go against
everything a long-term oriented society should aspire to achieve.
Today’s policies encourage spending over saving, reward the profligate
over the prudent, and support the failing at the expense of the
successful. The antidote now being dispensed puts us squarely in
uncharted territory in which the risks are outside the range of
historical experience. There is no obvious exit and no path to normalcy.

Syria warns of "surprise" response to Israel attack.Syria
warned on Thursday of a possible "surprise" response to Israel's attack
on its territory and Russia condemned the air strike as an unprovoked
violation of international law. Damascus could take "a surprise
decision to respond to the aggression of the Israeli warplanes", Syrian
ambassador to Lebanon Ali Abdul-Karim Ali said a day after Israel struck
against Syria. "Syria is engaged in defending its sovereignty and its
land," Ali told a website of the Lebanese militant group Hezbollah.

MSNBC Criticised For Editing of Gun Hearing Video. MSNBC invited viewers Wednesday to draw their own conclusions about
whether the parent of a Connecticut school shooting victim was heckled
at a legislative hearing but didn't address criticism that it aired a
deceptively edited video of the event. The NBC-owned cable news network found itself under attack for its
editing practices less than a year after three employees of NBC or an
NBC-owned station lost their jobs over the editing of a 911 call in the
Trayvon Martin case.

Financial Times:

Chinese cities put tax heat on steel mills. Cash-strapped
local governments in China have started demanding taxes from the
country’s steel mills up to two years in advance, an unusual practice
that highlights how desperate some cities have become for funds. Chinese
mills, which produce nearly half the world’s steel, have traditionally
been cash cows for local governments because of the tax revenues they
create. But
last year, as China’s economy slowed, profits at the country’s biggest
steel mills dropped 98 per cent from the previous year, according to the
China Iron and Steel Association. Losses reported by unprofitable mills
increased more than sevenfold. Yet that did not stop municipalities in northern and northeastern
China – also feeling the pinch from the economic downturn – from
pressuring some mills to pay tax up to two years ahead of time,
according to Zhang Changfu, CISA secretary-general. Unco-operative
companies have found themselves subject to audits, investigations, and
often big fines.

Handelsblatt:

Germany's opposition Social Democratic Party won't support
Chancellor Angela Merkel's plan for a fifth euro-area bailout for
Cyprus, citing people in the SPD. Some lawmakers from Merkel's CDU, as
well as FDP coalition partner, may vote against the plan.

Weidmann Says Bailouts Could Weaken Even Strongest Euro Members.
Bundesbank President Jens Weidmann said Europe’s current framework for
bailing out distressed nations will eventually weaken even the single
currency’s strongest members unless it is changed. “If things stay the
way they are, the consequences of unsound policies will be too easily
passed on to others,” Weidmann said in Berlin late yesterday. “Sooner or later the economically solid countries will be weakened. Liability and control have to be brought into balance.”
Germany, Europe’s largest economy, has pledged more than 300 billion
euros ($407 billion) in loans and guarantees to help shore up the
finances of euro member states such as Greece, Ireland and Portugal.
Weidmann, who’s also a member of the European Central Bank’s Governing
Council, has argued that policies including the OMT bond-purchase
program come too close
to the banned practice of financing states by printing money. Risks that have been shared via bailouts and ECB emergency
measures have already reached a “substantial level,” Weidmann
said. “If these risks rise, the culture of stability could be
eroded as if we had explicit joint liability.”

Bank of Italy Seen Vigilant as Monte Paschi Risk Surfaced. The
Bank of Italy acted vigilantly in its oversight of Banca Monte dei
Paschi di Siena SpA (BMPS), with the discovery of accounting
irregularities leading to a criminal investigation targeting previous
management, a former senior Bank of Italy official who was involved in
the inspections said. Pressure from the central bank prompted a shakeup of
executives at the Siena-based lender last year and led to the
uncovering in January of secret documents about some
transactions hidden from regulators, said the person, who asked
not to be identified because the probe is confidential.

Japan December Industrial Output Rises Less-Than-Forecast 2.5%. Japan’s industrial production rose
less than economists forecast, suggesting that a recovery in the
nation’s manufacturing sector is lagging a weakening yen. Output rose 2.5 percent from November, when it declined 1.4
percent, the Trade Ministry said in Tokyo today. The median
estimate of 25 economists was for a 4.1 percent gain. Production
fell 7.8 percent from the previous year.

Wall Street Journal:

U.S. Is Preparing More Tax-Evasion Cases. The
U.S. is expanding its crackdown of offshore tax evasion,
preparing numerous criminal cases against suspected offenders, defense
lawyers involved in the cases say. Four years after an agreement between
the U.S. and Switzerland pierced a veil of banking secrecy by requiring
Swiss bank UBS AG to turn over names of account holders, defense
lawyers estimate that federal prosecutors are conducting at least 100
criminal investigations
against suspected tax evaders. The moves come as the U.S. is
turning the screws on smaller banks that may have helped taxpayers stash
money in secret overseas accounts. On Monday, a federal judge in New York approved an Internal Revenue
Service summons demanding still more records from UBS. According to
court filings, the government now is focusing on U.S. taxpayers with
accounts at smaller Swiss banks that didn't have U.S. branches but
served customers through a UBS account in Stamford, Conn.

Risky Student Debt Is Starting to Sour. The number of student loans held by subprime borrowers is growing, and more
of those loans are souring, the latest signs that a weak job market and rising
debt loads are squeezing recent graduates. In all, 33% of all subprime student loans in repayment were 90 days or more
past due in March 2012, up from 24% in 2007, according to a Wednesday report by
TransUnion LLC. Meanwhile, the Chicago-based credit bureau found that 33% of the almost $900
billion in outstanding student loans was held by subprime, or the riskiest,
borrowers as of March 2012, up from 31% in 2007.

Israeli Jets Blast Arms Shipment Inside Syria. Israel bombed a suspected shipment of antiaircraft missiles in Syria
on Wednesday, according to regional and U.S. officials, in its most
ambitious strike inside its neighbor's territory in nearly two chaotic
years of civil war there. The early-morning strike in a border area west of Damascus targeted a
convoy of trucks carrying Russian-made SA-17 missiles to Hezbollah, the
anti-Israel Shiite militant and political group in Lebanon, according
to a Western official briefed on the raid.

Some Unions Grow Wary Of Health Law They Backed. Labor unions enthusiastically backed the Obama administration's
health-care overhaul when it was up for debate. Now that the law is
rolling out, some are turning sour.
Union leaders say many of the law's
requirements will drive up the costs for their health-care plans and
make unionized workers less competitive. Among other things, the law
eliminates the caps on medical benefits and prescription drugs used as
cost-containment measures in many health-care plans. It also allows
children to stay on their parents' plans until they turn 26.

Slaying Fuels Anger in Chicago.
The seemingly random killing of a 15-year-old girl who performed last
week as a majorette at President Barack Obama's second inauguration is
crystallizing anger over this city's high murder rate. The slaying of
Hadiya Pendleton, as she stood with friends Tuesday
afternoon in a park, came on a day that saw the city's 40th, 41st and
42nd murders of the year, according to police. It continued an uptick in
homicides that began last year when more than 500 people were killed.
The majority were gang-related shootings on the city's troubled south
and west sides. Semiautomatic weapons are banned in the city of Chicago, as are stores
that sell guns. But guns are available in neighboring suburbs, and gun
violence here goes hand in hand with the city's gang culture and a
membership police estimate at 100,000.

Threats Cloud Euro's Flight.
With Europe's Economy Still Hobbled, the Currency's Surge Could Soon
Stall. The euro, once on death's door, is on a monthslong tear, rising
Wednesday to its highest level since November 2011. But even some investors who helped propel the currency above $1.3560
Wednesday say it can't fly much further. Europe's economy is still in
the doldrums, they say, and a stronger euro could make the situation
worse. And with central banks elsewhere racing to push down their own
currencies, boosting the relative value of the euro, the European
Central Bank eventually could be compelled to join them.

Henninger: Obama's Thunderdome Strategy. The president's goal is to make Republican ideas intolerable. Conventional wisdom holds that these unorthodox tactics are a
mistake, that he's going to need GOP support on immigration and such.
And by now it's conventional wisdom that when our smiling president
transforms into Mr. Hyde he is merely channeling Saul Alinsky, deploying
the tactics of community-organizing campaigns, the only operational
world he knew before this.
The real pedigree, though, is a lot heavier than community organizing in Chicago. Speaking last Saturday, Rep. Paul Ryan
said that for Barack Obama to achieve his goals, "he needs to
delegitimize the Republican Party." Annihilate, delegitimize—it's the
same thing. The good news is that John Boehner and Paul Ryan recognize
that their relationship with this White House is not as partners in
anything. They are prey.

Facebook(FB) is mobile, but investors want more. Facebook Inc. Chief Executive Mark Zuckerberg kicked off the company’s
earnings call on Thursday proclaiming that the social network “is a
mobile company,” but investors may be more concerned about its spending
plans.

CNBC:

Hackers in China Attacked The Times for Last 4 Months. For the last four months, Chinese hackers have persistently attacked
The New York Times, infiltrating its computer systems and getting
passwords for its reporters and other employees. After
surreptitiously tracking the intruders to study their movements and help
erect better defenses to block them, The Times and computer security
experts have expelled the attackers and kept them from breaking back in. The
timing of the attacks coincided with the reporting for a Times
investigation, published online on October 25, that found that the
relatives of Wen Jiabao, China's prime minister, had accumulated a
fortune worth several billion dollars through business dealings.

Time to Get Off the China Stocks Train? Chinese shares are having their day in the sun, with the benchmark
Shanghai stock index trading at an eight-month high on Thursday. The
rally, however, may be close to running its course, some analysts say.

New al Qaeda Threat. A
jihadist website posted a new threat by al Qaeda this week that
promises to conduct “shocking” attacks on the United States and the
West. The posting appeared on the Ansar al Mujahidin network Sunday and
carried the headline, “Map of al Qaeda and its future strikes.” The
message, in Arabic, asks: “Where will the next strike by al Qaeda be?” A
translation was obtained by Inside the Ring. “The answer for it, in
short: The coming strikes by al Qaeda, with God’s Might, will be in the
heart of the land of nonbelief, America, and in France, Denmark, other
countries in Europe, in the countries that helped and are helping
France, and in other places that shall be named by al Qaeda at other
times,” the threat states. The attacks will be “strong, serious,
alarming, earth-shattering, shocking and terrifying.”

CNN:

Regulations are killing my business. These
small businesses are being squeezed by local regulations requiring
specific licenses. All are fighting back with the help of the
Institute for Justice, a civil liberties law firm.

EU freezes 900 mln euros to Poland pending fraud probe. The European Union has frozen
about 890 million euros ($1.20 billion) in aid earmarked for
building Polish roads because of a suspected fraud by
contractors, a Commission spokeswoman said on Wednesday. The
suspension, which is likely to be only temporary, comes
at an awkward time for the Polish government which is already dealing
with a sharp economic slowdown and thousands of lay-offs in the
construction industry. Poland's Deputy Minister for Regional Development, Adam Zdzieblo, said the decision was "completely incomprehensible"
and based on questionable assumptions.

Isn't the Chinese property bubble obvious?
Divergent views are emerging over whether
there is a bubble building in the Chinese property sector, which
has produced a string of aggressive high-yield issues this year,
the most recent of which was Greentown China's conveniently
successful US$400m bond this week. The recent hot flow of money into
Chinese high-yield property bonds, much of it from private banks unable
to earn a decent return elsewhere, had the look and feel of a sector
overheating, and many have indeed traded down in secondary. If it looks like a bubble and inflates like a bubble, then
it will ultimately pop like a bubble.

Electronic Arts(EA) slashes 2013 outlook as industry struggles. Electronic Arts Inc slashed its fiscal 2013 earnings forecast after a weaker-than-expected holiday quarter marked by disappointing sales of its "Medal of Honor" title, as the industry
struggles with flagging demand. Chief Financial Officer Blake Jorgensen said the earnings
forecast had been adjusted downward, to take into account
uncertainties in the seasonally weaker March quarter. "The economy hasn't gotten any stronger," he told Reuters in
an interview.

Qualcomm(QCOM) beats street, raises guidance, shares rise. Qualcomm Inc beat Wall Street expectations for its fiscal first-quarter earnings and revenue and raised its financial targets for 2013 due to growing demand for smartphones and high-speed wireless services. Qualcomm shares rose 6 percent in late trade on Wednesday as
the outlook from the leading supplier of chips for cellphones
wowed investors in contrast with sluggish demand at chip makers
such as Texas Instruments and Broadcom Corp.

The
China Securities Regulatory Commission may raise the leverage ratio for
securities companies to help "boost profitability", citing Li Geping,
secretary general of the Securities Association.

China Times:

China's
Beijing city has submitted a property tax trial plan to the State
Council for approval, citing an unnamed person close to the local
finance and tax department. The property tax may be imposed in the city
as early as 1H, citing the person.

BOTTOM LINE: Asian indices are lower, weighed down by industrial and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

The positions and strategies discussed on BETWEEN THE HEDGES are offered for entertainment purposes only and are in no way intended to serve as personal investing advice. Readers should not make any investment decision without first conducting their own thorough due diligence. Readers should assume the editor of this blog holds a position in any securities discussed, recommended or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in anyway, considered liable for the investment performance of any securities or strategies discussed.